Stocks End Flat as Traders Fret GDP Figures Could Signal Higher Rates

By MarketsFOXBusiness

U.S. equity markets pared triple-digit losses as traders digested the latest data that showed the economy posted 2.3% growth in the second quarter as it bounced back from a weak first quarter.

The Dow Jones Industrial Average was 5 points lower, or 0.03% to 17746. The S&P 500 added 0.17 of a point, or 0.01% to 2108, while the Nasdaq Composite rose 17 points, or 0.33% to 5128.

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Today’s Markets

A day after the Federal Reserve’s policy statement, which reiterated the central bank’s stance on being dependent on data before raising rates, investors got the latest snapshot of U.S. growth.

Data from the Commerce Department showed the U.S. economy grew at an annualized pace of 2.3% in the second quarter, rebounding from a weak first quarter. Moreover, figures from the first quarter were revised up to show a gain of 0.6%, rather than a contraction of 0.2%. Consumer spending, which rose 2.9% in 2Q from 1.8% in the prior quarter, helped boost growth.

The data didn’t help send stocks, higher, though, as equity markets held onto shallow losses following the data’s release.

David O’Malley, CEO of Penn Mutual Asset Management, said while growth continues to gain momentum from a weak winter, the data doesn’t change the tone of the overall economy.

“Economic growth clearly picked up and for the year, it’s on pace to be decent,” he said. “The data reinforces the idea that the Fed will tighten in September…at this point, bullish momentum for the market would be data that’s weaker than expected.”

Enthusiasm over the Fed’s statement, which sent U.S. markets higher on Wednesday, wore off by Thursday morning. The central bank’s latest language on the state of the economy failed to give investors any new clues as to when the Fed might begin to hike interest rates from historic lows.

“The boost that U.S. stocks were given on the back of the Fed’s statement yesterday has worn off,” David Madden, IG market analyst, wrote in a note. “Dealers have a short-term mindset, and as soon as they heard nothing to warrant an interest-rate hike in the immediate future, they jumped on the bandwagon, but it was short lived, and the statement was not so dovish it would justify fresh buying today.”

Weekly jobless claims data was also out Thursday. The number of Americans filing first-time claims for unemployment benefits rose to 267,000 last week, less of an increase than the 270,000 claims Wall Street expected from 255,000 the week prior.

Meanwhile, after data from the EIA showed a much bigger-than-expected drawdown in U.S. crude inventories on Wednesday, prices continued to carry momentum higher before reversing course midday.  U.S. crude traded  0.20% lower to $48.59 a barrel. Brent, the international benchmark, rose 0.07 % to $53.45 a barrel.

“The EIA weeklies are modeling an outright decline in U.S. production over the last couple weeks. These numbers are speculative and will need to be confirmed by monthly data, but do seem to go along with the latest industry guidance thus far, that Q2 is the peak of production and will likely fade going into the second half of the year,” Credit Suisse research analysts Jan Stuart and Johannes Van Der Tuin wrote in a note.

Gold dipped 0.46% to $1,088 a troy ounce.

In currencies, the euro traded 0.61% lower against the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury note rose 0.009 of a percentage point to 2.268%. Bond yields move in the opposite direction of prices.

On the corporate news front, Royal Dutch Shell announced it will slash 6,500 jobs and initiate spending cuts due to the prolonged decline on global oil prices and the persisting supply glut on the market.

Earnings season continued with results from ConocoPhillips (COP), Procter & Gamble (PG), Time Warner Cable (TWC), and T-Mobile (TMUS) out ahead of the bell. Quarterly reports from Electronic Arts (EA), Amgen (AMGN), and LinkedIn (LNKD) are due after the close of trade.

Facebook (NASDAQ:FB) shares were 4% lower after the social-media giant reported better-than-expected quarterly results on Thursday, but said profit declined 9% as it spent more money to boost mobile ad revenue and develop other products like its WhatsApp messaging service.

Whole Foods (NASDAQ:WFM) shares saw steep declines of more than 11%, the steepest drop in 15 months, after the company said its same-store sales decreased during the quarter after a food pricing scandal in New York hit grocery store chain.

Elsewhere in the world, Fed-fueled enthusiasm also failed to continue boosting global markets.

The Euro Stoxx 50, which tracks large-cap companies in the eurozone, fell 0.14%. The German Dax climbed 0.33%; the French CAC 40 jumped 0.51%, while the UK’s FTSE 100 rose 0.68%.

“The fear the U.S. is getting ready for an interest-rate increase in two months has sent buyers to the sidelines, and the market has fallen into the downward trend it has been since April,” Madden noted. “There are too many negative stories looming over the stock market at the moment.”

Meanwhile, China’s Shanghai Composite index fell 2.20%, while Hong Kong’s Hang Seng slipped 0.49%, and Japan’s Nikkei rose 1.08%.

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